Big Four auditors

From Wikipedia, the free encyclopedia Jump to: navigation, search The Big Four are the four largest international accountancy and professional services firms, which handle the vast majority of audits for publicly traded companies as well as many private companies, creating an oligopoly over the auditing industry. The Big Four firms are shown below, with their latest publicly available data:

Firm

Revenues Employees Fiscal Year Source

PricewaterhouseCoopers

$26.2bn

163d,000

2009

[1]

Deloitte Touche Tohmatsu $26.1bn

169,000

2009

[2]

Ernst & Young

$21.4bn

144,441

2009

[3]

KPMG

$20.11bn 135,000

2009

[4]

This group was once known as the "Big Eight", and was reduced to the "Big Five" by a series of mergers. The Big Five became the Big Four after the near-demise of Arthur Andersen in 2002, following its involvement in the Enron scandal. Contents

1 Legal structure 2 Mergers and the Big Auditors o 2.1 Big 8 (until 1989) o 2.2 Big 6 (1989-1998) o 2.3 Big 5 (1998-2002) o 2.4 Big 4 (2002-) o 2.5 Mergers and developments 3 Policy issues concerning industry concentration 4 Global Member Firms o 4.1 Peoples Republic of China o 4.2 Jordan o 4.3 Egypt

4.4 Indonesia 4.5 Israel 4.6 Japan 4.7 Singapore 4.8 Malaysia 4.9 Republic of Korea 4.10 Brazil 4.11 Saudi Arabia 4.12 Turkey 4.13 India 4.14 Pakistan 4.15 The Philippines 4.16 Sri Lanka 4.17 Sweden 4.18 USA 5 References
o o o o o o o o o o o o o o o

6 External links [edit] Legal structure

None of the Big Four accounting firms is a single firm. Each is a network of firms, owned and managed independently, which have entered into agreements with other member firms in the network to share a common name, brand and quality standards. Each network has established an entity to co-ordinate the activities of the network. In two cases (KPMG and Deloitte Touche Tomatsu), the co-ordinating entity is Swiss, and in two cases (PricewaterhouseCoopers and Ernst & Young) the co-ordinating entity is a UK limited company. Those entities do not themselves practice accountancy, and do not own or control the member firms. In most cases each member firm practices in a single country, and is structured to comply with the regulatory environment in that country. However, in 2007 KPMG announced a merger of four member firms (in the United Kingdom, Germany, Switzerland and Liechtenstein) to form a single firm. The figures in this article refer to the combined revenues of each network of firms. [edit] Mergers and the Big Auditors Since 1989, mergers and one major scandal involving Arthur Andersen have reduced the number of major accountancy firms from eight to four. [edit] Big 8 (until 1989) The firms were called the Big 8 for most of the 20th century, reflecting the international dominance of the eight largest accountancy firms: 1. 2. 3. 4. Arthur Andersen Arthur Young & Co. Coopers & Lybrand Ernst & Whinney (until 1979 Ernst & Ernst in the US and Whinney Murray in the UK)

5. Deloitte Haskins & Sells (until 1978 Haskins & Sells in the US and Deloitte Plender Griffiths in the UK) 6. Peat Marwick Mitchell, later Peat Marwick 7. Price Waterhouse 8. Touche Ross Most of the Big 8 originated in alliances formed between British and US accountancy firms in the 19th or early 20th centuries. Price Waterhouse was a UK firm which opened a US office in 1890 and subsequently established a separate US partnership. The UK and US Peat Marwick Mitchell firms adopted a common name in 1925. Other firms used separate names for domestic business, and did not adopt common names until much later: Touche Ross in 1960, Arthur Young (at first Arthur Young, McLelland Moores) in 1968, Coopers & Lybrand in 1973, Deloitte Haskins & Sells in 1978 and Ernst & Whinney in 1979.[5] The firms' initial international expansion was driven by the needs of British and US based multinationals for worldwide service. They expanded by forming local partnerships or by forming alliances with local firms. Arthur Andersen had a different history. The firm originated in the United States, and expanded internationally by establishing its own offices in other markets, including the United Kingdom. In the 1980s the Big 8, each now with global branding, adopted modern marketing and grew rapidly. They merged with many smaller firms. One of the largest of these mergers was in 1987, when Peat Marwick merged with the KMG Group to become KPMG Peat Marwick, later known simply as KPMG. [edit] Big 6 (1989-1998) Competition among these public accountancy firms intensified and the Big 8 became the Big 6 in 1989 when Ernst & Whinney merged with Arthur Young to form Ernst & Young in June, and Deloitte, Haskins & Sells merged with Touche Ross to form Deloitte & Touche in August. Confusingly, in the United Kingdom the local firm of Deloitte, Haskins & Sells merged instead with Coopers & Lybrand. For some years after the merger, the merged firm was called Coopers & Lybrand Deloitte and the local firm of Touche Ross kept its original name. In the mid 1990s however, both UK firms changed their names to match those of their respective international organizations. On the other hand, in Australia the local firm of Touche Ross merged instead with KPMG.[6][7] It is for these reasons that the Deloitte & Touche international organization was known as DRT International (later DTT International), to avoid use of names which would have been ambiguous (as well as contested) in certain markets. [edit] Big 5 (1998-2002) The Big 6 became the Big 5 in July 1998 when Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers. [edit] Big 4 (2002-) The Enron collapse and ensuing investigation prompted scrutiny of their financial reporting, which was audited by Arthur Andersen, which eventually was indicted for obstruction of justice for shredding

documents related to the audit in the 2001 Enron scandal. The resulting conviction, since overturned, still effectively meant the end for Arthur Andersen. Most of its country practices around the world have been sold to members of what is now the Big Four, notably Ernst & Young globally, Deloitte & Touche in the UK and Canada, and PricewaterhouseCoopers in China and Hong Kong. Big 4 are sometimes referred as "Final Four"[8] due to widely held perception that competition regulators are unlikely to allow further concentration of the accounting industry and that other firms will never be able to compete with the Big 4 for top end work as there is a market perception that they are not credible as auditors or advisors to the largest corporations. 2002 saw the passage of the Sarbanes-Oxley Act into law, providing strict compliance rules to both businesses and the auditors. [edit] Mergers and developments

Arthur Andersen o Developed from Andersen, Delany Ernst & Young o Arthur Young o Ernst & Whinney Ernst & Ernst (US) Whinney Murray (UK) Whinney, Smith & Whinney PricewaterhouseCoopers o Coopers & Lybrand Cooper Brothers (UK) Lybrand, Ross Bros, Montgomery (US) o Price Waterhouse Deloitte Touche Tohmatsu o Deloitte & Touche Deloitte Haskins & Sells Deloitte Plender Griffiths (UK) Haskins & Sells (US) Touche Ross Touche, Ross, Bailey & Smart Ross, Touche (Canada) George A. Touche (UK) Touche, Niven, Bailey & Smart (US) Touche Niven Bailey A. R. Smart o Tohmatsu & Co. (Japan) KPMG
o

Peat Marwick Mitchell William Barclay Peat (UK)

Marwick Mitchell (US) Klynveld Main Goerdeler Klynveld Kraayenhof (Netherlands) Thomson McLintock (UK) Main Lafrentz (US) Deutsche Treuhand Gesellschaft (Germany)

KMG

[edit] Policy issues concerning industry concentration In the wake of industry concentration and individual firm failure, the issue of a credible alternative industry structure has been raised.[9] The limiting factor on the growth of additional firms is that although some of the firms in the next tier have become quite substantial, and have formed international networks, effectively all very large public companies insist on having a "Big Four" audit, so the smaller firms have no way to grow into the top end of the market. [edit] Global Member Firms This section needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (April 2009) [edit] Peoples Republic of China In the Peoples Republic of China, the big four accounting firms are affiliated with local accounting firms as under current government regulations it is forbidden for foreign firms to open fully owned firms in China.

Pricewaterhouse Zhong Tian is affiliated with PricewaterhouseCoopers. KPMG Hua Zhen is affiliated with KPMG. Ernst & Young Hua Min is affiliated with Ernst & Young. DTT Hua Yong is affiliated with DTT.

[edit] Jordan 1 - Ernst & Young 2 - Deloitte Touche Tohmatsu 3 - KPMG 4 - PWC [edit] Egypt In Egypt, the "Big auditor firms" are local affiliates of the Big Network international firms:

1- Hazem hassan - KPMG.[10] 2- Mazars Mostafa Shawki & Co.[11] 3- Mansour & Co. PricewaterhouseCoopers. 4- Kamel Saleh Deloitte Touche Tohmatsu (DTT). 5- Emad Ragheb Ernst & Young. [edit] Indonesia In Indonesia, there are four large auditors, all are affiliates of the Big Four:

KAP Purwantono, Sarwoko, Sandjaja affiliate of Ernst & Young KAP Osman Bing Satrio Deloitte Touche Tohmatsu (DTT)[12] KAP Sidharta, Widjaja affiliate of KPMG KAP Haryanto Sahari & Rekan affiliate of PwC

[edit] Israel In Israel, there are five large auditors, four of whom are affiliates of the Big Four:[13]

Kost, Forer, Gabbay & Kasierer (Ernst & Young Israel) KPMG Somekh Chaikin Deloitte Brightman Almagor Zohar Kesselman & Kesselman, PwC Israel BDO Ziv Haft (affiliate of BDO International)

[edit] Japan In Japan, the "Big Four auditors" are local affiliates of the Big Four international firms:

Ernst & Young ShinNihon LLC affiliate of Ernst & Young KPMG AZSA & Co. - affiliate of KPMG PricewaterhouseCoopers Aarata affiliate of PricewaterhouseCoopers Deloitte Touche Tohmatsu affiliate of Deloitte Touche Tohmatsu (DTT)

English names of each firm are different from Japanese ones. Ernst & Young ShinNihon LLC is 'ShinNihon Yugen-sekinin Kansa Houjin ,' KPMG AZSA & Co. is 'Azsa Kansa Houjin ,' PricewaterhouseCoopers Aarata is 'Aarata Kansa Houjin ,' and Deloitte Touche Tohmatsu is 'Kansa Houjin Tohmatsu .' Following the discovery of the accounting fraud at Kanebo, the Financial Services Agency in Japan suspended ChuoAoyama from conducting audit work for inadequate internal controls, for two months from July 1, 2006 onwards. On July 1, 2006, PwC started a new accountancy firm in Japan, called PricewaterhouseCoopers Aarata. Unlike ChuoAoyama (renamed Misuzu subsequently)[14], which is a network firm of PwC, PricewaterhouseCoopers Aarata is a member firm of the PwC global network and will adopt its internal controls and methodologies.[15] Misuzu Audit Corp. dissolved in 2007 after one of its audit clients, Nikko Cordial, a stockbrokerage firm, was hit with an accounting scandal.[16] [edit] Singapore In Singapore, the affiliate firms of the Big Four are:

PricewaterhouseCoopers LLP Ernst & Young LLP KPMG LLP Deloitte Touche Tohmatsu LLP

[edit] Malaysia In Malaysia, the local affiliates have adopted the names of the Big Four international firms:

PricewaterhouseCoopers Ernst & Young KPMG Deloitte KassimChan member of Deloitte Touche Tohmatsu (DTT)

[edit] Republic of Korea The following domestic accountancy firms have joined the membership of international Big Four firms.

Hanyoung LLC member of Ernst & Young Samjong LLC member of KPMG Samil LLC member of PricewaterhouseCoopers Ahnjin LLC member of Deloitte Touche Tohmatsu (DTT)

[edit] Brazil 1 - PricewaterhouseCoopers 2 - Deloitte Touche Tohmatsu 3 - Ernst & Young 4 - KPMG [edit] Saudi Arabia In Saudi Arabia, the "Big Four auditors" are local affiliates of the Big Four international firms;

Deloitte & Touche Bakr Abulkhair & Co - member of Deloitte Touche Tohmatsu (DTT) PricewaterhouseCoopers AlJuraid - member of PricewaterhouseCoopers Ernst & Young Saudi Arabia - member of Ernst & Young KPMG Al Fozan & Al Sadhan - member of KPMG

[edit] Turkey In Turkey, the "Big Four auditors" are local affiliates of the Big Four international firms;

Gney Bagimsiz Denetim ve S.M.M. A.S. - member of Ernst & Young, Akis Bagimsiz Denetim ve S.M.M. A.S. - affiliate of KPMG, Basaran Nas Bagimsiz Denetim ve S.M.M. A.S. - affiliate of PwC

DRT Bagimsiz Denetim ve S.M.M. A.S. - affiliate of Deloitte Touche Tohmatsu (DTT)

In addition to the big four, there are other affiliate companies which have weaker affiliate relations compared to affiliates of big four. [edit] India In India, the member firms are not permitted to change their names to match the international brands.[17] The local firms are:

Price Waterhouse, member of PwC Deloitte Haskins & Sells, member of Deloitte Touche Tohmatsu (DTT) BSR & Co, member of KPMG S.R. Batliboi & Co. & S.R. Batliboi & Associates member firms of Ernst & Young

[edit] Pakistan In Pakistan, the Big Four are affiliates of the following local audit firms, which are the prominent firms of Pakistan:

Ernst & Young (Pakistan)- Formerly Ford Rhodes Sidat Hyder & Co.[18] KPMG Taseer Hadi & Co. - member of KPMG International[19] M. Yousuf Adil Saleem & Co member of Deloitte Touche Tohmatsu (DTT)[20] A. F. Ferguson & Co. - Member of PricewaterhouseCoopers[21]

[edit] The Philippines In the Philippines, the affiliate firms of the Big Four are:

Manabat Delgado Amper & Co. (formerly C.L. Manabat & Co.) - affiliate of Deloitte Touche Tohmatsu (DTT) Isla Lipana & Co. (formerly Joaquin Cunanan & Co.) - affiliate of PwC Manabat Sanagustin & Co. (formerly Laya Mananghaya & Co.) - affiliate of KPMG Sycip Gorres Velayo & Co. (SGV & Co.) - affiliate of Ernst & Young

[edit] Sri Lanka In Sri Lanka the affiliated firms of the big four are:

KPMG Ernst & Young PricewaterhouseCoopers BDO Partners Someswaran & Jayawickrama, Manoharan & Sangakkara (SJMS) Associates Deloitte Touche Tomatsu (DTT)

[edit] Sweden

Ernst & Young (formerly Hagstrm & Olsson)

hrlings PricewaterhouseCoopers Deloitte Touche Tohmatsu (formerly TRG Revision) KPMG Bohlins

[edit] USA

Deloitte Ernst & Young PricewaterhouseCoopers KPMG

Argentina Precio Casa de Agua Deleite y toque Ernesto y Joven Cape MG

[edit] References

1. ^ Emily Chasan (2009-10-6). "PricewaterhouseCoopers revenue slips to $26.2 bln". Reuters.

http://www.reuters.com/article/marketsNews/idUSN0643140220091006.

2. ^ "Deloitte by the numbers". Deloitte. http://www.deloitte.com/view/en_GX/global/about/annualreview/deloitte-by-the-numbers/index.htm. Retrieved 2010-02-20.

3. ^ "Ernst & Young Reports Fiscal Year 2009 Global Revenues of US$21.4 Billion". Reuters.
http://www.reuters.com/article/pressRelease/idUS70452+30-Sep-2009+BW20090930.

4. ^ "KPMG reports 2009 revenues". KPMG. 2009-12-17.

http://us.kpmg.com/RutUS_prod/Documents/8/2009-revenues-20-billion.pdf. Retrieved 2010-02-20.

5. ^ Institute of Chartered Accountants in England & Wales: Firms' family trees 6. ^ Deloitte: Our domestic routes 7. ^ Alison Leigh Cowan (1989-12-05). "Deloitte, Touche Merger Done". New York Times.
http://query.nytimes.com/gst/fullpage.html?res=950DE7DD103BF936A35751C1A96F948260. 8. ^ Final Four 9. ^ Lawrence A. Cunningham, Too Big to Fail: Moral Hazard in Auditing and the Need to Restructure the Industry Before It Fails, Columbia University Law Review 10. ^ http://www.kpmg.com.eg/about.html 11. ^ http://www.mshawki.com 12. ^ http://www.deloitte.com/id 13. ^ http://duns100.dundb.co.il/ts.cgi?tsscript=/2009h/Accountancy1&order=Accountants%20desc&page=1 14. ^ Nicholas Neveling (2007-02-22). "PwC dumped Misuzu because of poor quality". Accountancy Age. http://www.accountancyage.com/accountancyage/news/2183947/pwc-dumped-misuzu-poor-quality. 15. ^ http://www.pwc.com/extweb/ncpressrelease.nsf/docid/0F5DAE3C47C4A4798025718C0030FC36 16. ^ "PwC to shut down Japanese affiliate". Accountancy Age. 2007-02-21. http://www.accountancyage.com/accountancyage/news/2183797/pwc-shut-japanese-affiliate. Retrieved 2010-03-01. 17. ^ Accountancy's tangled web, Financial Times, July 25, 2006 18. ^ E&Y website 19. ^ KPMG website 20. ^ Deloitte website 21. ^ PWC website [edit] External links A table of links to the Big 4 accountancy firms, from a Rutgers University website

Frontpage of Arthur Andersen website archived in 1996 Frontpage of Coopers & Lybrand LLP website archived in 1996 Frontpage of Price Waterhouse website archived in 1997

vde Big Four auditors Deloitte Touche Tohmatsu Ernst & Young KPMG PricewaterhouseCoopers Retrieved from "http://en.wikipedia.org/wiki/Big_Four_auditors"